Week 35: Bullish bets on agriculture explode

Hedge funds and large investors increased their bullish futures and options bets across the 28 commodities we track by 12.8 percent to 1,458,000 lots last week. This was the biggest weekly increase since mid July and the third week in a row with increased exposure corresponding to a nominal value of 122 billion dollars. The data was compiled before stock and commodity markets went into reverse last Thursday.




Bullish bets on agriculturals increased the most in more than a year. Just like the previous couple of weeks the increase was to a large extent driven by the continued explosive move into agricultural commodities with the supply situation continuing to tighten amid adverse weather conditions. Bullish bets on grains rose by 30 percent with corn and soybeans receiving the greatest interest.

Investors continued to move into oil futures as bullish bets rose the most since March. Some of the increase was triggered by Hurricane Irene as she took aim at the U.S. East Coast together with a somewhat improved outlook before once again loosing ground towards the end of the week.

Exposure to the metal sector dropped by 6.4 percent as hedge funds continued to reduce their holdings of gold for the fourth week running. All other metal futures, such as copper, silver and platinum also saw reduced exposure. Total investor exposure to gold through ETFs and long futures positions are now at 2,865 metric tonnes, the lowest level since July and down 250 tonnes from the August high.

The soft sector saw coffee bets more than double to 15,335 lots followed by cocoa, while sugar, OJ and cotton exposure fell.

Background information: The Commitments of Traders is a report issued by the Commodity Futures Trading Commission every Friday with data from the previous Tuesday. It comprises the holdings of participants in various U.S. futures markets split into "commercial" and "non commercial" holdings. The non commercial or speculative holding are typically institutional investors such as hedge funds and CTAs. Analysts and investors follow changes in these positions because such transactions can reflect an expectation of a change in prices.